County opposes farm property tax proposal

By Chris Lavender / Times-News

Published: Wednesday, April 24, 2013 at 04:49 PM.

Alamance County Farm Bureau President Vaughn Willoughby said the Farm Bureau opposes the bills except for Senate Bill 511. Those raising horse stock for commercial purposes should be allowed to use present use value for their land, Willoughby said.

The forestry management requirement needs to stay intact to provide uniform practices among tree growers while a reduction in the acreage requirements for agricultural land would create a loss in tax revenue for the county because more land would be considered for the program, Willoughby said.

Willoughby said the present use value program’s land ownership requirement should also stay intact. Willoughby said if this requirement is removed then developers could purchase present use value land and hold it for several years paying lower property tax rates with no intention of using it for farming.

The Alamance County Board of Commissioners met with the Farm Bureau earlier this month and discussed the changes. The commissioners discussed it again during a board meeting on April 15. County Manager Craig Honeycutt said the county opposed the four bills.

“Taken together, these four bills would create a tax shelter for businesses and investors owning at least 20 acres of land as well as reducing the taxes on persons with a horse and five acres,” County Tax Administrator Jeremy Akins said. “This is a far cry from the original purpose of the legislation in saving the family farm.”

The present use value program was established in 1973 to reduce the tax burden on small family farms. Akins said farmers require a large amount of land in production of their crops and with the changes in the market for land, assessment at full value would act as a disincentive to continue production.

Willoughby said the Farm Bureau supports the current program and believes it’s a critical tool for farmers to use. Those who qualify must be actively using their land for commercial farming and sell at least $1,000 worth of crops from production annually.

State lawmakers have filed four bills designed to make changes to a program used by farmers to assess their land.

Alamance County leaders don’t support the proposed changes.

Under the present use value program, farmers engaged in horticulture, agriculture, or forestry can apply to have the value of their property on tax records reduced, lowering their property tax bills. Present use value reduces horticulture land value by 85 percent, agriculture land value by 90 percent, and forestry land value by 95 percent.

Senate Bills 511 and 508 were filed on March 27 and are under review in a finance committee. House Bill 586 was filed on April 4 and House Bill 874 was filed on April 11. Both are under review in an agricultural committee in the house.

These four bills, if approved, could potentially erode the property tax bases of counties since more people would be able to qualify for the present use value program and pay property taxes at lower rates than market value. Alamance County leaders discussed earlier this month what the impact of the bills would be if they become law.

Senate Bill 511 is designed to allow those with horses on their land to qualify for the program. Horses are currently exempt. Under Senate Bill 508, ownership of the present use value land would no longer be a consideration. Current ownership requirements reserve the present use value program for individual farmers. If the ownership requirement is removed, then businesses and investment groups could purchase land and be qualified for the program.

House Bill 586 would remove a forestry management plan requirement for commercial tree growers under present use value, while House Bill 874 would reduce the agricultural land minimum requirement for the program from 10 acres to five acres.

Alamance County Farm Bureau President Vaughn Willoughby said the Farm Bureau opposes the bills except for Senate Bill 511. Those raising horse stock for commercial purposes should be allowed to use present use value for their land, Willoughby said.

The forestry management requirement needs to stay intact to provide uniform practices among tree growers while a reduction in the acreage requirements for agricultural land would create a loss in tax revenue for the county because more land would be considered for the program, Willoughby said.

Willoughby said the present use value program’s land ownership requirement should also stay intact. Willoughby said if this requirement is removed then developers could purchase present use value land and hold it for several years paying lower property tax rates with no intention of using it for farming.

The Alamance County Board of Commissioners met with the Farm Bureau earlier this month and discussed the changes. The commissioners discussed it again during a board meeting on April 15. County Manager Craig Honeycutt said the county opposed the four bills.

“Taken together, these four bills would create a tax shelter for businesses and investors owning at least 20 acres of land as well as reducing the taxes on persons with a horse and five acres,” County Tax Administrator Jeremy Akins said. “This is a far cry from the original purpose of the legislation in saving the family farm.”

The present use value program was established in 1973 to reduce the tax burden on small family farms. Akins said farmers require a large amount of land in production of their crops and with the changes in the market for land, assessment at full value would act as a disincentive to continue production.

Willoughby said the Farm Bureau supports the current program and believes it’s a critical tool for farmers to use. Those who qualify must be actively using their land for commercial farming and sell at least $1,000 worth of crops from production annually.

When present use value land is sold to a new owner who doesn’t plan to continue farming the land, then the new owner is required to pay market value property taxes for the previous three years prior to the sale, current year market value property taxes, and a 9 percent penalty fee.

Akins said state law requires the county to audit the properties in present use value but for nearly 37 years there was no auditing program in place for present use value.

Commissioner Tom Manning said there have been some abuses of the program that have been recently addressed. In 2010, the county hired Craig Stanley to appraise and audit parcels classified under the program. Stanley has since disqualified parcels that did not meet state standards.

Last year alone, Stanley was able to bring in $150,000 net revenue from his auditing activities. This amount represented a number of parcels that have not qualified for present use value for years but had remained on the books as being present use value.

Honeycutt said if the four bills were approved then the county would likely have to hire more auditors to ensure the present use value program is being used properly.

Alamance County is currently deferring about $2 million in property tax revenues each year due to the program. There are 2,164 parcels of land or 103,079 acres in the county that are currently taxed at present use value.